Correlation Between United Breweries and Medtronic PLC
Can any of the company-specific risk be diversified away by investing in both United Breweries and Medtronic PLC at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining United Breweries and Medtronic PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Breweries Co and Medtronic PLC, you can compare the effects of market volatilities on United Breweries and Medtronic PLC and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in United Breweries with a short position of Medtronic PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Breweries and Medtronic PLC.
Diversification Opportunities for United Breweries and Medtronic PLC
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and Medtronic is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding United Breweries Co and Medtronic PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medtronic PLC and United Breweries is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on United Breweries Co are associated (or correlated) with Medtronic PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medtronic PLC has no effect on the direction of United Breweries i.e., United Breweries and Medtronic PLC go up and down completely randomly.
Pair Corralation between United Breweries and Medtronic PLC
Assuming the 90 days trading horizon United Breweries is expected to generate 1.85 times less return on investment than Medtronic PLC. In addition to that, United Breweries is 1.5 times more volatile than Medtronic PLC. It trades about 0.01 of its total potential returns per unit of risk. Medtronic PLC is currently generating about 0.03 per unit of volatility. If you would invest 7,017 in Medtronic PLC on September 3, 2024 and sell it today you would earn a total of 1,220 from holding Medtronic PLC or generate 17.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Breweries Co vs. Medtronic PLC
Performance |
| Timeline |
| United Breweries |
| Medtronic PLC |
United Breweries and Medtronic PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Breweries and Medtronic PLC
The main advantage of trading using opposite United Breweries and Medtronic PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Breweries position performs unexpectedly, Medtronic PLC can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Medtronic PLC will offset losses from the drop in Medtronic PLC's long position.| United Breweries vs. Apple Inc | United Breweries vs. Apple Inc | United Breweries vs. Apple Inc | United Breweries vs. Apple Inc |
| Medtronic PLC vs. KENNAMETAL INC | Medtronic PLC vs. MAGNUM MINING EXP | Medtronic PLC vs. Lion One Metals | Medtronic PLC vs. United Breweries Co |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stocks Directory module to find actively traded stocks across global markets.
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